Paul Morris is investment director at the UK Department for International Trade (DIT)’s venture capital unit, which connects innovative UK companies seeking investment with corporate venturers and venture capital funds around the world. Morris worked in corporate venturing for more than 20 years, having spent most of that time running chemicals company Dow Chemical’s venturing unit. He spoke to features editor Nicole Idar Lee about the Showcase program of pitching events run by DIT and Silicon Valley Bank (SVB), and the role CVCs play in the UK’s innovation economy
How was the Showcase formed, and how did the partnership with SVB materialise?
The idea was seeded over a glass of wine with Gerald Brady of SVB in California three years ago. Both SVB and the UK government’s VC unit work to support startups, and we decided to run an event designed to connect UK startups with potential investors.
Selecting and preparing the entrepreneurs and inviting the investors were joint tasks – SVB leads with the startups and the VCU invites the majority of the investors. The first Showcase was Digital Health, held on 1 December, 2014, hosted by publisher Reed Elsevier’s corporate venturing unit, now REV Venture Partners, in London. We had around 40 attendees, 10 companies pitching, a keynote speaker, and refreshments during the networking time.
Feedback was positive, investors engaged with the pitching companies and subsequently followed up with them, and we therefore started planning our second Showcase – Cybersecurity, held at BT Tower. More than 100 people attended, mostly investors, and the keynote was given by Mark Hughes, CEO of BT Security [the security division of telecoms company BT] and Conrad Prince, UK Cybersecurity Ambassador. These invitation-only events have gone from strength to strength since then.
What sectors have the Showcases featured?
Sectors that have been covered include internet of things (IoT), Fintech, Physical Sciences, Smart Retail, Enterprise Software and Health Tech. During 2017 our Showcases will include Artificial Intelligence/Virtual Reality, Big Data/Analytics and Cybersecurity. SVB moved into their new offices in London last year, and that has now become the regular location for the Showcases.
How does the Showcase work, what is the order of events?
The basic formula that has proven very successful with investors has remained unchanged. A keynote speaker from the target industry helps set the scene. 10 startups, five early-stage and five growth-stage, give five-minute pitches with two minutes for Q&A. The events are held in the afternoon and last five hours, over half of which is dedicated to networking.
Feedback confirms the value of this networking time, not only for investors to meet the companies, but also for investors to engage with one another. A brochure is provided which contains one-page summaries of each company pitching. That brochure is also shared electronically with global investors who are interested in the sector and the UK.
DIT and SVB have now hosted eight Showcases. How have investors responded?
Startups that have pitched at the Showcases have collectively raised over $325m since the date of our first event. Typically the delegates at any one Showcase include investors from around 10 different countries. Our recent Health Tech Showcase set a new record with 15 different countries being represented, from across North America, Asia and Europe.
We are now usually at capacity for each event, with over 100 attendees. As the Showcases become more established, the quality of both companies pitching and investors attending continues to be of the highest level. We increasingly have to decline requests from service providers and others. The events are also supported by the British Venture Capital Association [the industry advocacy group].
What kind of a role can corporate venturers play in nurturing UK emerging enterprises?
Corporate venturers are increasingly important as providers of capital, participating in around 20% of all VC deals. But it is the additional strategic value that they bring that differentiates a CVC from other VC investors.
Most CVCs are aligned with global organisations. As such they are well positioned to support their portfolio companies in accessing export markets and opening doors to commercial partners. In addition, there may be a business relationship of real value between the startup and the corporate investor.
The UK has its own corporate venturers, which are complemented by an extremely strong presence of non-UK CVCs. Indeed, according to data from GCV Analytics, 74% of all CVCs based in the UK are from abroad, the highest percentage of any developed VC market globally.
This means that there is a huge range of corporate venturers for UK startups to engage with, providing access to many markets around the world. Bringing foreign CVCs to the UK is a major priority for the VCU. Past successes include network equipment manufacturer Cisco’s $150m UK-dedicated fund.
What Showcase success stories can you share?
The collective raise of $325m is very encouraging. Cybersecurity company Darktrace, visual discovery application Blippar and digital risk monitoring business Digital Shadows spring to mind among the companies that have pitched and raised significant sums.
The total funding raised by the pitching companies since inception exceeds $530m – this figure includes both funds raised before the companies pitched at our first six Showcases, and funds raised after they pitched. We have not yet added in the two most recent Showcases.
What other projects do you have in the pipeline to help British emerging enterprises find the capital that they need?
We are strengthening our team with 2 new specialists with wide experience and deep sector expertise in life sciences and in fintech, IoT and cybersecurity. That gives us greater capacity to identify and support potential high-growth UK startups.
On the investor side we are running a program of visits to key markets such as the USA, Singapore, Japan, India and Korea to identify and engage with CVCs and VCs who would like to invest in the UK. We work closely with DIT colleagues in these key markets, not to forget China.
Significantly, we are working with five separate US CVCs who are looking to establish a base or fund in Europe. In each case the UK is their first preference. None of the events of the last 9 months have changed their opinion that for VC investments the UK is the clear leader in Europe, and the optimum location for their activities on this side of the pond.